Colorado Court of Appeals: A Withdrawing Attorney’s Claim in Quantum Meruit Against Former Co-Counsel Accrues at the Time the Withdrawing Attorney Knows or Should Know of the Recovery

Fee Sharing Agreement—Statute of Limitations—Quantum Meruit.

The Hannon Law Firm, LLC (Hannon) appealed the trial court’s judgment on the pleadings in favor of defendants, Melat, Pressman & Higbie, LLP (Melat) and Howarth & Smith (Howarth). Melat and Howarth appealed the trial court’s order denying their motion to dismiss Hannon’s claim. The judgment was reversed, the order was affirmed, and the case was remanded for further proceedings.

Melat entered into a fee-sharing agreement that provided that Howarth would receive 40 percent of the total fees obtained in the litigation, and that all three firms each would receive 20 percent, to represent certain clients in a tort action. The relationship between Hannon and Howarth became strained, and Hannon withdrew, with court approval, from representation in the case. After the underlying tort case settled, Melat paid Hannon for the costs Hannon had incurred before withdrawal, but refused to pay any compensation for the services that Hannon had rendered. A little less than three years after being notified of the settlement, Hannon filed the complaint in this action, asserting a single claim for quantum meruit against Melat and Howarth for the reasonable value of the services it had provided before withdrawal.

On appeal, Hannon contended that the trial court erred in granting judgment on the pleadings against it because the quantum meruit claim could not accrue, for statute of limitations purposes, until at least the time Hannon learned or should have learned of the recovery under the contingent fee agreement. The statute of limitations applicable to a quantum meruit claim is three years from the date the claim accrues. When multiple law firms represent clients under a contingent fee agreement, a withdrawing attorney’s claim in quantum meruit against former co-counsel accrues at the time the withdrawing attorney knows or should know of the recovery. Because Hannon’s appeal was filed within three years from the time it received notice of the recovery, its appeal was not time-barred. Therefore, the trial court erred in entering judgment on the pleadings in favor of Melat and Howarth.

Melat and Howarth contended that Hannon’s claim against them cannot succeed because a similar claim against the client in this case would be barred by C.R.C.P. Chapter 23.3, Rule 5(d). However, Rule 5(d) applies only to claims in quantum meruit brought against a client. Accordingly, the trial court’s order denying Melat’s and Howarth’s motion to dismiss Hannon’s claim was affirmed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries by the Colorado Court of Appeals on March 3, 2011, can be found here.